Watch for: January Nonfarm Payrolls (8:30 a.m. Eastern Time): seen up 166,000, after increasing 155,000 a month ago. January Unemployment Rate (8:30): seen at 7.8%, flat from a month ago. January Average Hourly Wages (8:30): seen up 0.2%, after rising 0.3% a month ago. January Reuters/UMich Consumer Sentiment (9:55): seen at 71.5, from earlier reading of 71.3. January ISM Manufacturing Survey (10:00): seen at 51.0, from 50.7 a month ago. December Construction Spending (10:00): seen up 0.6%, after falling 0.3% a month ago. January Auto Sales: seen at 15.2 million.

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The Breakfast Briefing

The stock market’s pursuit of record high stalled this week following a batch of weaker-than-expected economic data.

The question facing Wall Street: Can Friday’s jobs report get the rally back on track?

GDP figures showed economic growth unexpectedly contracted in the final three months of the year, prompting some worries about the overall state of the economy. As we reported yesterday, the Citigroup Economic Surprise Index has been trending lower over the last month.

While investors generally caution against putting too much emphasis on one monthly report, Friday’s jobs data will either allay concerns about the economy or add to the string of data that have fallen short of expectations.

Economists expect nonfarm payrolls grew by 166,000 last month, only a bit faster than the 155,000 gain in December. The jobless rate is forecast to remain at 7.8%.

To get the rally back on track, the jobs figures might not only have to beat expectations, but beat them handily. Jobs data have started strong in the first few months of each of the last two years, but have tailed off in the spring and summer months, notes Joseph LaVorgna, chief U.S. economist at Deutsche Bank.

“Financial markets will react less enthusiastically to news of strong January results [Friday] morning given the recent propensity of early year strength to make way for midyear weakness,” LaVorgna says. “Our best guess is that the job market is likely to be stronger this spring relative to either 2011 or 2012, assuming there are not any negative exogenous shocks.”

On top of that the January jobs report, in particular, is typically difficult to read. The government updates its population estimates at the beginning of every year, which in the past has caused big movements in the survey figures compared to the December data.

Seasonal issues and weather patterns also play big roles in swaying the data and could cause revisions in the months ahead.

“The January employment report is the most perilous of the year to forecast,” says Stephen Stanley, chief economist at Pierpont Securities.

Even so, investors are still searching for that final catalyst that will push stocks back to record highs. While the Dow finished January up 5.8% — its best start to a new year since 1994 – the blue-chip index has fallen in three of the last four days.

“Markets are attempting to have the first ‘retracement’ of 2013,” says Scott Redler, chief strategic officer at T3Live.com.

That’s why the onus, rightly or not, is yet again on the jobs report.

Morning MarketBeat Daily Factoid: On this day in 1982, David Letterman’s late-night show premiered on NBC.

–Steven Russolillo

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Stocks to Watch

Exxon is expected to report fourth-quarter earnings of $1.99 a share, according to a consensus survey by FactSet.

Chevron is projected to post fourth-quarter earnings of $3.06 a share.

Merck is forecast to post fourth-quarter earnings of 81 cents a share.

Analysts Fight Bank CEOs’ Pessimism: “The heads of major U.S. banks are sounding cautious notes about the next 12 months. But some analysts tracking their companies don’t share the bankers’ persistent unease.”

Wasendorf Gets 50 Years: “Russell Wasendorf Sr., was on Thursday sentenced to the maximum 50 years in jail after admitting to orchestrating a fraud at the futures brokerage he founded and misleading regulators for almost 20 years.”

Bottom Falls Out of Debt-Ridden City: “Harrisburg officials have identified dozens of sinkholes. But the Pennsylvania capital has a bigger problem: It has been shut out of the municipal-debt market and can’t afford to make the necessary repairs.”